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Four investment trusts for a secure income amid rampant inflation and rising rates

By Jonathan Jones, Editor, Trustnet 22 June 2022:

Investors that need to find reliable income without the volatility may be best served thinking outside the box, according to experts.

While traditional equity has struggled so far this year, and many open-ended income funds have held up better than expected, income trusts have struggled.

The IT Global Equity Income and IT UK Equity Income sectors are down around 7% each year-to-date, as the below chart shows.

As such, of the four experts asked by Trustnet, none selected a traditional equity trust for income, although David Johnson, an analyst at Kepler Trust Intelligence, suggested investors may want to take a look at Middlefield Canadian Income.

While Canadian equities may not seem like an obvious choice, he said that they “offer an attractive option for income investors to hedge against inflation”…

Away from equities, Matthew Read, senior analyst at QuotedData, suggested there could also be value in bonds, which have had a tough year as central banks have raised interest rates around the world.

CQS New City High Yield was his pick. The trust has had a phenomenal run recently, making the highest return in the IT Debt – Loans & Bonds sector over five and 10 years, while it is flat year-to-date at a time when its average peer has lost 5.1%.

Manager Ian Francis has “long thought that central bankers’ caution was creating a real risk of the inflation genie getting out of the bottle and has been positioning CQS New City High Yield’s portfolio accordingly,” said Read.

Financials – which tend to benefit from rising interest rates – and real assets, account for a large part of NCYF’s portfolio, while Francis also thinks that the UK economy is more vulnerable to inflation than Europe and the US, and so has been increasing the trust’s exposure to overseas assets, while also increasing its exposure to equities.

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